Britain is the EU’s biggest problem and the reason the eurozone’s economies haven’t been fixed, former German Chancellor Gerhard Schröder said on November 7. He accused Britain of standing in the way of the reforms Europe needed to fix its economy.

“We need to press ahead with Europe’s political unity, towards a kind of European federation,” said Schröder.

“We can assume that Britain is no longer willing to join the euro area,” said Schröder. “Countries that are not in the euro area cannot prevent greater integration. It’s tough but you cannot say ‘I will not be there but I want a say.’”

Schröder’s comments are exaggerated, but they contain a kernel of truth. Britain is a brake on European integration. It does not want to be part of a federal Europe, and once it parts ways with the EU, integration will proceed much more quickly.

But is Britain the biggest brake right now? No. The UK is perfectly happy to let the eurozone go ahead and do whatever it wants, as long as Britain is left out of it.

Most of Schröder’s analysis is spot on though. For the euro to be fixed for good—rather than held together with sticking tape, only to fall apart again at the next crisis—the eurozone needs to become a “kind of European federation.” Britain is making this more difficult. But the real obstacle here is that most European countries aren’t willing to give control of their economies over to a central authority. And since German money would be at stake, Germany would control that authority. At the same time, Germany doesn’t want to risk its money and financial reputation purely for the sake of the southern European nations.

The crisis will have to get worse to persuade both southern Europe and Germany to form a European superstate. In the meantime, Britain is guilty of getting in the way, so it makes a useful scapegoat.

Schröder also accused Britain, correctly, of blocking EU regulations over the financial sector. Britain has slowed down these regulations as much as it can. Right or wrong, Britain is heavily dependent on its financial center. Europe’s rules—often seemingly designed to take business away from London rather than fix any actual problems—risk harming the only sector that is really prospering in Britain right now. If that is crippled before a new engine of growth is built, it will hurt the whole of Britain and everyone living there.

Schröder’s comments clearly demonstrate that Britain and the eurozone are on separate paths. The eurozone is on its way to becoming a superstate, while Britain isn’t even sure it wants to be in the EU in its current form.
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